Speed of mean-reversion of the convenience yield process.
alpha
Mean-level of the convenience yield process.
sigmaE
Diffusion parameter of the convenience yield process.
rho
Correlation coefficient between the Brownian motion
driving the spot price and the convenience yield process.
Details
The dynamics of the Schwartz two-factor model is explained in the
schwartz2f class documentation or in
the package vignette in the doc-folder.
Value
An object of class schwartz2f.
Author(s)
Philipp Erb, David Luethi, Juri Hinz
References
The Stochastic Behavior of Commodity Prices: Implications for
Valuation and Hedging by Eduardo S. Schwartz Journal of Finance
52, 1997, 923-973
See Also
fit.schwartz2f for parameter estimation.
d/p/q/r/simstate for the density, distribution,
and quantile function of the state variables and random number
generation. plot-method for
schwartz2f-objects.
Examples
# ## Initialize a 'schwartz2f' object with high convenience yield volatility:
# obj <- schwartz2f(sigmaE = 0.7)
#
# plot(obj) # plot it
#
# rstate(10, time = 1, s0 = obj) # generate 10 random variates.
#
# ## Get the probability of the event 'the spot price is >= 100 and the
# ## convenience yield is >= 0':
# pstate(c(0, -Inf), c(100, 0), time = 10, s0 = obj)